Finance Options

Finance Lease

Finance lease requires you to put down an initial advance rental (deposit), followed by a fixed term with contract options between 24 and 60 months, usually followed by a ‘final rental’ or ‘balloon’.

At the end of the agreement, the final balloon is paid off by the sale of the vehicle and these funds are used towards settling any outstanding finance. 

Although there are mileage considerations that determine the ‘final rental’, mileage penalties from the finance provider are not applicable, exceeding the mileage agreed will have an effect of the final value of the vehicle but will incur no penalties. 


Advantages

· Fixed monthly rentals

· No damage recharge as you are responsible for the disposal of the vehicle

· Commercial vehicles are up to 100% tax deductible

· No need to be VAT Registered

· Finance terms from 24 to 60 months

· Low deposit options available.


Disadvantages

· The responsibility of the vehicle disposal is down to the hirer along with associated depreciation risks

· You must have fully comprehensive insurance for the term

· The hirer takes the risk or reward of the depreciation of the vehicle

Hire Purchase

Hire purchase requires you to put down an initial deposit, this is usually the full VAT followed by fixed monthly repayments. These repayments typically range between 24 and 60 months. At the end of the contract or sooner, having paid all the payments outstanding plus any option to purchase fee, you will own the vehicle.


Advantages

· You own it at the end of the contract

· Purchase cost and interest elements of the agreement may be Corporation Tax deductible

· Fixed interest rates

· Early settlement of the agreement is possible

· Monthly payments are not subject to VAT

· No damage or excess mileage recharges at end of agreement.

.The full VAT deposit can be reclaimed on the next quarterly VAT return (for VAT registered companies).


Disadvantages

· You are liable for the full value of the vehicle

· there is no "hand back" option at the end of the contract

· For LCV (Light Commercial Vehicle) buyers the full amount of the VAT must be paid up front.

· Monthly payments tend to be higher as there is no final balloon payment. 

Lease Purchase

Lease purchase requires you to put down an initial deposit, this is usually the full VAT followed by fixed monthly repayments with the option of a final payment (balloon). 


These repayments typically range between 24 and 60 months. At the end of the contract, or sooner, having paid all of the payments, including the optional final payment (balloon) along with any option to purchase fee, you will own the vehicle.


Advantages

· Vehicle ownership at the end of the contract

· Similar to Hire Purchase, but by adding a final (balloon) payment the monthly payments are reduced.   

· Fixed interest rates

· Early settlement of the agreement is possible

· Monthly payments are not subject to VAT

· No damage or excess mileage recharges at end of agreement.


Disadvantages

· You are liable for the full value of the vehicle

· there is no "hand back" option at the end of the contract

· The final payment (Balloon) can be large and would therefore need to be budgeted for. For LCV (Light Commercial Vehicle) buyers the full amount of the VAT must be paid up front. 

Contract Hire

Contract hire requires an initial advance rental (deposit) which can be as little as your first monthly rental, followed by a fixed term and mileage with contract options between 24 and 60 months. At the end of the contract you return the vehicle to the funder. There are terms and conditions which could incur additional costs on return, including mileage and vehicle condition.


Advantages

· Minimum capital expenditure

· Accurate monthly budgeting

· Fixed interest rates

· Up to 100% TAX deductible. 


Disadvantages

· Fixed term and mileage contract

· Early termination can be expensive

· If you do more miles than agreed you will be charged excess mileage

· You must look after the vehicle and return it in a well maintained condition otherwise you will be charged for any damage over and above that stated in the Fair Wear and Tear Guide where applicable

· No option to own the vehicle at the end of the contract. 

Principality Motor Company Ltd are trading as a credit broker and not a lender, and are authorised and regulated by the Financial Conduct Authority. We can introduce you to a limited number of carefully selected finance partners and may receive a commission from them for the introduction. Principality Motor Company Ltd, Links Court, St Mellons, Cardiff, CF3 0LT. Representative finance examples are for illustrative purposes only. Finance is subject to status and credit acceptance. Terms and conditions apply. Available to 18s and over & UK residents only. Guarantees and/or indemnities may be required. Excess mileage and damage charges may apply when vehicle returned.